Stocks With Large And Growing Dividends

The S&P 500 index of large American companies has a yield of just over 2%. Fewer than one in 10 of its members pays more than 5%. Over two centuries ended 2002, however, U.S. shares offered an average dividend yield of 4.9%. The stock market's recent performance underscores the importance of dividends. The S&P 500 index currently trades close to its level of 12 years ago. An investor who goes a dozen years without price gains while using a 5% dividend yield to buy more shares ends up with a profit of more than 80%, thanks to the power of compounding payments.

Of course, high dividend yields are only useful if they're sustainable -- if companies can be counted on to continue making their payments. Company managers are generally loathe to cut their dividend payments, so they tend to commit only to amounts they're confident they can pay.

Source: SmartMoney

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